Globalisation

Vani K Borooah
 Readings
For an anti-globalisation perspective see:
¾ Joseph Stiglitz, Globalisation and its Discontents, Allan Lane,
2002
For a pro-globalisation perspective see:
¾ Jagdish Bhagwati, In Defense of Globalization, Oxford
University Press, 2004
For globalisation and poverty see:
¾ “Global Economic Inequality”, The Economist, 11 March
2004
For child labour see:
¾ Kaushik Basu, “The Economics of Child Labor”, Scientific
American, October 2003
 Economic Globalisation
Economic globalisation is the integration of
national economies into the international
economy through
¾Trade in goods and services
¾Foreign Direct Investment
¾Capital Flows
¾Transfer of technology
¾Flow of workers
 Features of Globalisation
Globalisation is driven by two features:
¾Technological: particularly transportation,
communication, and information
¾Pro-globalisation policies among the world’s
policy makers
In this last sense, globalisation today is
different from 19th and early 20th century
globalisation: then integration co-existed with
protectionism
 Managing Globalisation
Globalisation can created several problems and insecurities:
¾ Movements of services and capital are extremely rapid and
have created financial crises (Asian Crisis)
¾ Competition is sharper today, and insecurities are greater, than
they were in a previous era: transfer of technology and
multinationals mean that production is a global not a local
phenomenon
¾ Producers in poor countries are exposed to risk as they shift
from food crops to cash crops
¾ Consequently, “fair trade” as much as “free trade” is a big
concern
¾ Globalisation has constrained the ability of national
governments to provide for their citizens
 Anti-Americanism
The anti-globalisation case is underpinned by
some key sentiments:
¾Globalisation gives licence to unscrupulous
multinational corporations to pursue profits
¾Many of these corporations are American and
they dominate the world’s business and
cultural life
¾So “Globalisation” is really “Americanisation”
 Globalisation and Poverty
¾ Critics of globalisation argue that over 1980-2000
richer countries grew faster than poorer countries: so
inequality between countries has increased
¾ Proponents of globalisation argue that the countries
which benefited most from globalisation were China
and India, home to many of the world’s poor
¾ High growth in China and India has meant that global
poverty has diminished: so inequality between people
has diminished
¾ On a $1 per day poverty line, percentage of poor
people fell from 17% in 1970 to 7% in 1998: a
reduction of 200 million mostly from China and India
 Globalisation and Child Labour
¾There are 186 million children (5-14) who are
“working”
¾Of these, 111 million work in hazardous jobs:
mining, construction
¾And 8 million are child soldiers or prostitutes
¾So, 1 in 6 children are “child labourers” and
most of them live in developing countries
 Why Child Labour?
¾ Child labour is generated by parental poverty rather than
parental greed
¾ So child labour declines with prosperity and that is why it is so
difficult to eradicate In China child labour participation rate
has fallen from 48% in 1950 to 12% in 1995
¾ In Cambodia, child labour participation rate has fallen from
29% in 1950 to 25% in 1995
¾ Imposing fines on firms that employ child labour (India’s
Child Labour Act) is worse than useless
¾ Firms just pay lower wages and the child has to work longer
hours for the same target income
 Imposing Labour Standards
¾ Being a worker is not the worst thing that can happen
to a child
¾ Our concern should be with what happens to a child if
he/she is no longer a worker
¾ A ban on child labour or boycotting child labour
products can make children worse off
¾ Boycotting hand-knotted carpets made by children in
Nepal made many children unemployed
¾ As a consequence, the number of child prostitutes in
Nepal went up by 5,000-7,000
High/Low child labour equilibrium
¾ Labour supply is increased by child labour
¾ So, the general level of wages is low
¾ At low wages, adults find it impossible to earn enough to
support families
¾ So, children are sent to work
™ Labour supply is decreased by children not working
™ So, the general level of wages is high
™ At low wages, adults find it possible to earn enough to support
families
™ So, children do not need to work
So equilibrium can be self-reinforcing
 Globalisation and Women
¾Globalisation has increased women’s
participation in both developing and developed
countries
¾In developing countries, they are employed in
manufacturing in the EPZs
¾In developed countries, they are employed in
services
¾But, there is general concern about the
exploitation of women
Agriculture
Mining
Manufacturing
Construction
Trade
Hotels
Transport, storage, and communication
Financial services
Business services
Public Administration
Education
Heath Care
Community and Personal Services
 UK Employment, 2005 Q1: FT 3-4 September 2005
2005, employment (000) % change 1985-05
Agriculture 223 -34.6
Mining 171 -67.8
Manufacturing 3,133 -37.0
Construction 1,278 10.8
Trade 4,487 25.5
Hotels 1,747 55.8
Transport, storage, and communication 1,547 10.2
Financial services 1,085 22.2
Business services 4,042 91.8
Public Administration 1,442 0.3
Education 2,283 36.7
Heath Care 2,879 47.4
Community and Personal Services 1,363 48.5
Total 26,680 16.4
 Exploitation of Women
¾Global Care Chains: women as servants
¾Unpaid House Work: women at home
¾Women in low-paid jobs: women at work